CFOs Identify Bulls and Bears

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Retail chief financial officers (CFOs) remain fairly confident about the state of the industry, but sentiment downgraded significantly when asked about the U.S. and global economies, according to the latest GE Capital survey of middle-market CFOs.

“Although the optimism we saw six months ago has tempered a bit, CFOs are confident in their ability to manage operations through changing market conditions,” said Jim Hogan, senior managing director, corporate retail finance, GE Capital. “After completing over $2.1 billion in retail finance volume this year, we continue to see an increase in retailers with stable cash flows, lean operations and clean balance sheets shifting from survival mode to seeking finance to rebuild inventory and expand conservatively in new or existing markets.”

The survey, which was conducted during the third quarter, included responses from 532 CFOs -- 50 from the retail arena -- with average revenue of $214 million. The findings indicate that retail CFOs, like their peers in other industries, remain fairly bullish on the state of their own industry, but have grown bearish on the U.S. and global economy. Additional retail industry survey findings include:

Revenues: Fifty-eight percent believe their revenues will increase in 2011, down from a high of 80 percent in the first quarter.

Capital Expenditures: Expectations increased slightly, with 42 percent expecting to increase CAPEX, up from 38 percent in the first quarter.

Pricing: Fifty-eight percent of retail CFOs plan to increase the cost of their products, a sentiment that remained consistent with the previous survey.

Consumer Credit Availability: Forty-six percent expect the availability of consumer credit to improve marginally in 2011, down 10 percentage points since the first quarter of 2011.

Growth Areas: Most (72 percent) see discount spending as the segment of the market that will likely grow the most in 2011. Twenty percent believe luxury spending will grow.

Inventory: Half expect inventory levels to remain the same through the remainder of 2011; 30 percent expect to increase their inventory.

Financing Needs: A majority (68 percent) expect their financing needs to remain the same compared to 2010.

Hiring: Although slightly down from the first quarter of the year, 68 percent indicate they plan to make additional hires in next 12 months.